Business Plan Questions: Pricing & Shipping

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I am in serious need for some feedback and advice for how to price my product. I'm very keen to hear any thoughts (no matter how obvious) on (i) what do you think my price/shipping strategy should be across channels, and (ii) how to investigate further issues. Very keen to break this analysis paralysis stage I am in! Thanks in advance for any thoughts

Product Overview
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This is an ultra-competitive space and I am a mom & pop newcomer. I need ways to stick out, with our brand proposition being quality.

I believe customers selling Product X fail in 2 respects. The main/ primary reason is the product should be refrigerated/shipped with cold packs. The second reason is the ingredients could be of higher quality.

Product X retails most commonly for $25. The vast majority of the space is at $15-25, and some branded products are $28-35, and the very rare brand at $50. The highest volume items are $18-25. I don't perceive any differentiation in product between the $15-$50 product aside from brand/reputation.

I think the higher quality message is worth $3/unit. Refrigeration/shipping with an ice pack is the bigger differentiator, however, and would drive more volume than the +$3/unit from higher quality. Maybe refrigeration can drive +$3-5/unit, but I know it can drive volume. So in aggregate I think I can charge +$3-8/unit. So if average Product X is $25, I can get +$28-33/per bottle.


My Problem: Refrigeration/Ice Pack = Expensive
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Refrigeration + Ice Pack = +$13.50 in cost vs. using Amazon FBA
- Adding an ice pack/thermal bag/logistics cost adds ~$3 in material cost.
- Further, you will need to do FBM not FBA (FBA doesn't have refrigerated warehouses/ice pack shipping) -- so you need to pay the Amazon marketplace fee and pay the entirety of shipping out of your pocket. You want to send priority mail at $10.50 (+$7 vs. USPS first class) at your own cost.

So I Have 4 Possible Sales Strategies (I Think)
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1) Sell on Amazon FBA/Walmart etc. at $28 (no refrigeration, no ice pack)
2) Sell on Amazon FBM/Walmart etc. at $41 (refrigerated product with priority mail ice pack).
3) Offer two different ASIN/SKU on each channel (let the customer decide)
4) Sell the $28 unrefrigerated version on all channels, and the refrigerated version on my website.

Why I Struggle
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Reasons against charging $41:
1) I am not sure what the volume impact is from charging $41. Maybe this is what I need to cement my place on crowded marketplaces. But maybe this is just pricing myself out of business.
2) My charging $41 doesn't increase my margin dollars, it is a straight pass through of my incremental cost. I don't think consumers understand the incremental cost to do this and how my margin % will shrink.
3) If the vast majority of products are not refrigerated -- am I needlessly pricing myself out of the market?

Reasons for charging $41
1) My brand/product will very differentiated, and could drive volume
2) It keeps with my brand proposition of quality & high integrity. That is my brand!

Reasons for mixed offering
1) Customers can decide if the science warrants +$13 cost

Reasons against mixed offering
1) It sends a mixed message: why should consumers pay +$13/50% for the same product, if a vendor they trust feels comfortable offering the same product at a cheaper price without refrigeration? How can I advertise 'refrigerated is better' and yet offer an unrefrigerated version?
#business #plan #pricing #questions #shipping
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  • Profile picture of the author Oziboomer
    Originally Posted by tacostandlagunabeach View Post

    So I Have 4 Possible Sales Strategies (I Think)
    ===============================================
    1) Sell on Amazon FBA/Walmart etc. at $28 (no refrigeration, no ice pack)
    2) Sell on Amazon FBM/Walmart etc. at $41 (refrigerated product with priority mail ice pack).
    3) Offer two different ASIN/SKU on each channel (let the customer decide)
    4) Sell the $28 unrefrigerated version on all channels, and the refrigerated version on my website.
    It sounds like you have the options narrowed down.

    Why not test all four options and get some data from the market to work on?

    Let the numbers decide and also try to survey all purchasers of each offer to find out their core motivation.

    Once you have some results then expand the most profitable option.

    added later - Oh why not find other refrigerated products or deliveries you could piggyback with. Maybe there is already a product out there where the company is paying for refrigerated delivery and they have capacity to add something to their network for a small marginal charge.

    Best regards,

    Ozi
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  • Profile picture of the author Frank Donovan
    This sounds to me more like a positioning issue than a pricing one, although obviously, price can help with positioning.

    Without knowing the product, it's difficult to be more precise, but my instinct would be to settle on one shipping option - only refrigerated. That way you'd be able to market the drink as too good to risk arriving in a less than optimum condition.

    Again, not knowing the product, but it might be possible to stress in your marketing the importance of refrigeration in terms of quality (health?) and suggest that companies not using that delivery method are cutting corners or offering an inferior service.
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  • You can't really piggy back on deliveries. Its a B2C sales process and kitting it up with another product is impractical. Thank you for the idea though.
    I think you are right about letting the #s decide. Which requires offering both options (unrefrigerated and refrigerated) at least at the start. Logically, this is the only way to obtain the data to make a decision. The question remains then about how to position offering the dual options.. How do you sell the value proposition of refrigerated, without insulting the buyers of unrefrigerated
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